Each year I help over 500 clients file their Canadian and US tax returns as well as plan for both their Canadian and US investment accounts. I also regularly help new US clients plan for their move to Canada.
Canadian taxpayers (including US citizens living in Canada) with US investments may need file CRAs T1135 foreign income verification form. The T1135 form is required whenever a Canadian taxpayer’s cost in foreign property is more than $100,000. Some exceptions do apply however as the following assets do not need to be reported:
- Personal use real property
- US IRA and 401k accounts
- Certain trust assets
- For a complete list of T1135 please see below
For most foreign assets held in a Canadian investment account taxpayers can use a simplified method of reporting. Unfortunately those that hold US investments in US investment accounts with US brokers it’s definitely not that simple.
Under the simplified T1135 reporting method a taxpayer is only required to report US securities within Canadian brokerage accounts by country totals. In addition, these figures are almost always provided by Canadian brokers to their clients.
In contrast, for taxpayers that hold US investments in US brokerage accounts the reporting is significantly more complicated. First, the taxpayers will be required to report each security individually on the T1135.
As you can see from the onerous reporting requirement for US investments held by Canadian residents through a US broker it may make sense to rethink where you hold your US investments. Not only will you decrease the complexity of your filing requirements in many cases US investment companies and advisors are not allowed to maintain non-registered accounts for Canadian residents. If you have non-registered investments with a US broker it’s important that you ask them if you can in fact have the account legally managed from the US.
In most cases it can be a wise decision to engage a Canadian cross border financial planner to help manage your cross border assets. Not only will these individuals be able to legally manager your US investments from Canada they will understand your Canadian and US cross border tax situation. A comprehensive understanding of your tax situation is essential to proper future planning.
If you have questions about form T1135 or would like to discuss your investments with a Canadian cross border financial planner please give me a call at 250-661-9417 (or text) or email at email@example.com